Is This The Next Big Constitutional Alcohol Battle? – A Challenge in Missouri To Wholesaler Director and Officer Residency Requirements

A Federal District Court has rejected a challenge to the requirement under Missouri’s Liquor Control Law that the officers and directors of a wholesaler must be residents of Missouri based on a refusal to extend the logic of Granholm to wholesalers.

Missouri has a “resident corporation” rule for wholesalers. Under Section 311.060.2(3) a “resident corporation” is defined as:

“[A] corporation incorporated under the laws of this state, all the officers and directors of which, and all the stockholders, who legally and beneficially own or control sixty percent or more of the stock in amount and in voting rights, shall be qualified legal voters and taxpaying citizens of the county and municipality in which they reside and who shall have been bona fide residents of the state for a period of three years continuously immediately prior to the date of filing of application for a license, provided that a stockholder need not be a voter or a taxpayer, and all the resident stockholders of which shall own, legally and beneficially, at least sixty percent of all the financial interest in the business to be licensed under this law…”

This regulation requires that all corporate officers, directors, and shareholders who own or control 60% or more of the company’s stock reside in Missouri for at least three years and be qualified legal voters and taxpaying citizens.

The Missouri subsidiary that brought the suit with Southern met all the requirements except for the residency requirements because the officers and directors were Florida residents.

After significant briefing (You can find the original memorandum in support of the request for judgment here; the response and counter-request here and here; and the reply in support of Southern’s motion here) the District Court issued this opinion denying the companies’ motion for summary judgment and granting the State’s motion.

The opinion is worth a read as it addresses each of the arguments raised by the companies.

In particular, the Commerce Clause challenge was rejected based on a reading of Granholm implying that Granholm’s holding only applies to alcohol producers (e.g. brewers, vintners, and distillers) and not to any other portion of the three-tiered system. Those of you following this debate and the commerce clause questions left open by Granholm will note that this completely side-steps the issue of the proper standard of analysis for these questions raised in this Case Note by Amy Murphy “Discarding The North Dakota Dictum: An Argument for Strict Scrutiny of the Three-Tier Distribution System”. In fact, the Court’s opinion uses the justification of the producer/other-tier distinction to cite directly to the North Dakota dictum and then apply that dicta – “the three-tier system itself is ‘unquestionably legitimate” – as a justification for upholding a law that discriminates against wholesaler license applicants based on the Missouri residency requirements.

What’s even better is that there appears to be a brief hint at a legitimate purpose analysis in the Court’s opinion when discussing Missouri’s right to enforce the law. This is certainly a case to watch in the upcoming year as it will undoubtedly lead to some interesting appellate decisions.